Investment pays off for users of managed portfolios

In a new case study by HUB24, advisers reveal the why behind the growing trend to leverage managed portfolios to deliver client value and efficiencies in their business outlining the cumulative benefits for their business and clients over time. As adoption rates continue to accelerate with 53% of advisers now using managed portfolios innovation in managed portfolio solutions continues to deliver benefits for both advisers and their clients.

Head of Managed Portfolio Brett Mennie said as the market leader in managed portfolios, having been awarded Best Platform Managed Accounts solution for the 6th year running, HUB24 is continuing to invest in enhancing their managed portfolio capability to help advice practices enhance their value proposition, engage their clients, and grow their business.

“For some time now, evidenced through the HUB24 Platform Alpha series whitepapers, we’ve known that innovative managed portfolio functionality such as tax optimisation capabilities combined with great advice can deliver real value for clients. The implementation efficiencies gained from the use of managed portfolios also has a significant impact on a clients’ portfolio value over time,” Mennie said.

“The benefits of managed portfolios in helping advisers access professional portfolio management while delivering a scalable, efficient client value proposition in a cost-effective manner are becoming increasingly clear to advice practices, the longer they use managed portfolios.

“Advisers are telling us that while there are many benefits to using managed portfolio in the first year, over time in the longer term, they’re seeing even greater outcomes for them and their clients.”

In an interview with HUB24, Ford + Scott Financial Planning Director Tim Scott said his firm’s decision to move to managed portfolios back in 2014 has enabled his business to scale up, become more efficient and implement investment changes quickly for clients.

“The use of managed portfolios allowed us to embed our philosophy more efficiently, give us huge traction with clients and enabled us to heavily grow the business. We’re about to expand from four advisers to nine, and that’s on the back of the operational efficiencies that managed portfolios have created for us,” Scott said.

Scott’s decision to move to managed portfolios was driven by several key factors including increasing client value and engagement, improving transparency of underlying shares, and creating efficiencies in portfolio management.

“We had a heavy direct equity exposure in our client portfolios and the volume of ROAs needed to achieve a portfolio change was quite burdensome. Having a structure in place that creates efficiency but also transparency and communication has led to a huge amount of trust and client engagement.”

Tim Townsend, founder, and partner at Melbourne based private wealth firm TownsendCobain said committing to managed portfolios completely is the key to success.

“Over an 18-month period we presented the benefits to our clients and now we’ve implemented managed portfolios for almost 100% of our clients. This has created a fantastic base for our future growth,” Townsend said.

“We’re finding that client interactions are now much less focused on how their portfolio is going and more about their goals and objectives. It’s more outcomes-based, which is allowing our advisers to have far more meaningful conversations with their clients.”

Both Tim Scott and Tim Townsend’s experience of using managed portfolios in their practices overtime is consistent with research findings conducted by Investment Trends which also found the longer an adviser uses managed portfolios in their practice, the greater the perceived client benefits across the following five key areas:

Improving transparency

• While 26% of advised in the first year recognised the benefits of providing clients with the ability to see the underlying shares in their managed portfolio, this increased to 59% for businesses that had been using managed portfolios for four years or more.

Cost effectiveness

• While 38% of respondents noted cost-effectiveness was a benefit for clients in the first year, this number increased to 55% at four years or more.

Ownership

• After using managed portfolios, 28% of advisers recognised the client benefits of direct ownership of individual securities in the portfolio in year one, compared with 42% at four years or more.

Tax management

• Perception of tax effectiveness/CGT management as a key benefit of managed portfolios increased from 22% in the first year to 39% at four years or more.

Effectiveness

• More than half (52%) agreed managed accounts was the most effective way to implement model portfolios at four years or more.